Rapid innovation in the oilsands: a worthy challenge

Blog -
Oct. 31, 2013 - By Matt McCulloch

“History repeating itself” isn’t typically a positive expression. It usually refers to a series of errors or oversights typically resulting from leaders failing to learn from past efforts. It is with this in mind that Alberta’s forthcoming innovation plans will want to avoid past mistakes and repeat what Alberta has done well.

The Alberta government recently commissioned an esteemed panel to inform its new approach to applied research and commercialization in the province, i.e., a new innovation system. But, this is not the first time the province has implemented such a process and, considering the optimism that was pinned to those previous efforts, it’s fair to wonder how much hope we should have for this one.

Let’s be clear, we are not starting from scratch. Alberta can proudly claim to be highly innovative, with many successes within many sectors — from education (Smart boards) and health (Cold-FX), to construction (the ceramic brick) and resource development (steam-assisted gravity drainage, or SAGD). We also have new institutions that have been specifically created to accelerate innovation in the resources sector, such as the Climate Change and Emissions Management Corporation (CCEMC) andCanada's Oil Sands Innovation Alliance (COSIA).

In many ways, Alberta’s future prosperity will be defined by whether we, as a province, will continue repeating past missteps, or whether we will be bold enough now to design a new strategy to make Alberta a global leader in innovation.

The real challenge

Indeed, the challenge at hand is not whether Alberta can be more innovative — of course we can be, and we will be. The challenge is whether we can make that shift rapidly, and in a way that succeeds in attaining Alberta’s holy grail of growth through “economic diversification” while also improving our environmental performance and global reputation.

The question, of course, is how?

Despite important discrete initiatives, there are major challenges with the current “innovation system.” Tellingly, no one seems to be able to articulate what this “system” is. This is not surprising, given the lack of common vision among a broad array of institutions all supporting innovation in Alberta — uncoordinated and fragmented actors within the province (who are often acting at odds and even competing for resources) with no metrics or benchmarks to measure success or improve performance.

While there have been different tactical developments and initiatives in the recent past, these have failed to produce material results. Ultimately, Alberta must develop an overarching innovation strategy that’s based on tomorrow’s opportunities, not today’s realities.

Opportunities for innovation

Some revealing insights have emerged from our own work at the Pembina Institute on clean energy technology (also here and here and here). We’ve also had many discussions with thought leaders from industry, government, and academia and with independent consultants who we specifically asked for their thoughts on this topic. With that research in mind, there are nine ways for Alberta to improve its innovation system, while achieving the desired economic and environmental benefits:

Develop a vision for innovation Identify deliberate goals and metrics for the province among government, academia, and industry associations that help to focus the innovation system and improve the ability to measure outcomes

Ensure governance of the broader system Have an independent body accountable to the government that rationalizes the system, coordinates the discrete innovation support providers and intermediaries, ensures they are connected with the governments central innovation body, and have them focused on a common vision and goals

Perform an effective diagnostic review of the systemUse historical diagnostic information as a basis for better coordination of the system; past attempts have either been inadequate or no body has effectively used the information.

Set “aspirational regulations” Have a vision of something to strive toward, something to be motivated for and a way to mobilize creativity and new technologies (e.g., Tailings Directive 074 — while industry has yet to meet this Directive, by any measure, it has likely incented a vast amount of technological solutions that would not have otherwise come to bear)

Develop public policies that create appropriate market signalsUse public policy as a core tool to spur innovation and look to other jurisdictions for good examples

Ensure the market, led by the oilsands sector, is adequately engaged in “pulling” solutions that address needsJust as Einstein once quipped that the invention of the laser was a “solution looking for a problem,” Alberta has too many technology developers “pushing” solutions without a sense of real needs and priorities

Engage the supply chain, led by the oilsands sectorSupply chains are the greatest “market” to help scale existing commercial technology and the resource sector supply chain is the “thickest,” as it purchases in high volumes from across all sectors. To date, however, supply chains are only in the very early stages of thinking about clean technology — some further ahead than others. They don’t know the landscape and some operate under the false assumption that clean technology is high cost and underdeveloped.

Treat innovation as a human system, not a technological oneEnsure key sources of creativity and critical relationships are developed and maintained. The innovation system will need features that accommodate complexity and expect non-linearity in how innovation occurs. Do not approach innovation too intellectually or too objectively.

Untapped potential

With Canada’s GDP growth rate projected to be 2.5 per cent next year compared to over five per cent for emerging markets, Canada is at an obvious competitive disadvantage. The root of the rapid innovation challenge is the unique and significant constraints facing the resource sector — namely having capital-intensive sunk assets (such as the oilsands) that cannot be put at risk from the testing of new ideas. Instead, some of the biggest opportunities for innovation are with new — and clean — technologies that are capital intensive, which generate slow returns and thus make it difficult to attract already limited capital.

Our untapped potential lies in our ability to learn how to rapidly innovate in the resource sector. Resource-based industries are our jurisdictional advantage, and there is already a history of innovation to be embraced and leveraged to open the doors to major economic opportunities and environmental benefits. The oilsands can lead the way for Alberta, and Alberta can lead the way for Canada.

Will Alberta’s current process for developing an effective innovation strategy get it right this time? Will all the opportunities be realized and seized? There is really only one sure test: will the new process design for innovation itself be innovative?

Having spent the last 15 years on Pembina’s consulting team, Matthew McCulloch has largely focused on innovation, clean technology and collaboration. This November, he will join the Canadian Oil Sands Innovation Alliance to work on innovation and collaboration in the oilsands full-time.

Executives at Canadian Natural Resources Limited (CNRL) said little about an ongoing blowout at an underground oilsands extraction site until late last week, when the company confirmed that bitumen emulsion — a mixture of oilsands and water — is still escaping from the Clearwater formation.

To help inform the debate over the Keystone XL pipeline, the Pembina Institute has produced a backgrounder about the climate impacts associated with the proposed pipeline. The backgrounder features new analysis showing that producing enough bitumen to fill the Keystone XL pipeline would lead to a significant increase in greenhouse gas emissions, and inhibit Canada’s ability to meet its climate targets.

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